Granite Properties, which is in the midst of transforming its portfolio to focus on the office sector, is putting some desirable industrial assets up for grabs and Duke Realty Corp. just edged out the competition to grab two of them. In an-all cash transaction, Duke Realty acquired two properties totaling 582,840 square feet in the teeming Port of Houston.

In Morgan’s Point, Duke snapped up Barbour’s Cut Business Park, a two-building property encompassing 356,600 square feet, and in Seabrook, the REIT acquired the 226,240 square-foot industrial facility known as Bayport Container Terminal. Both assets occupy premium spots immediately across from container terminals along Houston’s Ship Channel and are fully occupied by Gulf Winds International under a lease agreement that will not expire for more than 10 years.

Granite charged commercial real estate firm Holliday Fenoglio Fowler L.P. with marketing the facilities as part of a 15-property portfolio of industrial assets in Houston and Dallas. “Barbour’s and Bayport generated the most interest because they are right across from container yards, so they are in irreplaceable locations and they also have a good regional credit tenant,” Rusty Tamlyn, senior managing director with HFF, told CPE. “They are new, state-of-the-art buildings so lots of REITs with a gateway port strategy were particularly interested.”

Metropolitan Houston’s industrial market fared better than most during the economic downturn. The area’s average vacancy rate in the third quarter of last year was 6.6 percent, which was quite impressive compared to the U.S. average of 10.5 percent. “We had over 4 million square feet of absorption over the last 12 months,” Tamlyn added. “Our economy is good. The oil and gas business is still doing well and that is about half of Houston’s economy. Also, the Port of Houston is second in the country in terms of tonnage.”

Houston’s industrial market is positioned to perform even better in 2011, he adds. “There is also very little construction so occupancy levels and rental rates should start increasing.”

Neither Granite nor Duke Realty will disclose the financial terms of the transaction. However, current investment trends in the Houston industrial market indicate that the deal did not come with a bargain-basement price tag. “A lot of money was raised for the acquisition of distressed properties, but there are not a lot of them on the market. Sales involve mostly value-add or stabilized properties,” Tamlyn said.